CHAPTER
1
INTRODUCTION
1.1
Background of the Study
In an increasing competitive and dynamic business
environment, every organization needs to identify, anticipate, satisfy and care
for customers to maximize profit, meet the requirement of stakeholders and have
competitive advantage.
Every industry including bank has an underlying structure or a set of
fundamental economic and technical characteristics which give rise to
competitive forces. A firm can clearly improve or erode its position within an
industry through its choice of strategy. Competitive strategy, then, not only
responds to the environment but also attempts to shape the environment in its
favour (Porter, 2005). The strategist must therefore seek to position his or
her firm to cope best within its industry environment or to influence that
environment in the firm’s favour.
Business
strategy development is concerned with matching customers requirements (needs,
wants, desires, preferences, buying patterns) with the capabilities of the
organization, based on the skills and resources available to the business
organization, leading to the issue of core competence (Holmes and Hooper,
2000). The pursuit of competitive advantage is at the root of organizational
performance and as such understanding the source of sustained competitive
advantage has become a major area of study in the field of strategic management
(Porter, 2005, 2001; Barney, 2001). The resource-based view stipulates that the
fundamental sources and drivers of competitive advantage and superior
performance are chiefly associated with the attributes of resources and
capabilities, which are valuable (Barney, 2006; 2001).
Performance
is associated with a firm’s results. Performance indicated the performance of
organizations and revealed the outcome of business processes and
accomplishments and the success of meeting established goals (Zhang &
McCullough, 2005). Jouirou and Kalika (2004) measured organizational
performance by a subjective way including cost reduction, customer
satisfaction, improved production, and the ability to innovate. Wu (2001) used
efficiency, sale performance, customer satisfaction and relationship
development to measure of firm performance.
Furthermore,
the resource-based view provides an avenue for organizations to plan and
execute their organizational strategy by examining the role of their internal
resources and capabilities in achieving competitive advantage. Product differentiation
is a positioning strategy that many firms use to distinguish their products
from those of competitors. (Lamb, Hair, and McDaniel 2004).Product
differentiation is pervasive in markets. It is at the heart of structural
empiricism and it smoothes jagged behavior that cause paradoxical outcomes in
several theoretical models. Firms differentiate their products to avoid ruinous
price competition. Representative consumer, discrete choice, and location
models are not necessarily inconsistent, but performance depends crucially on
the degree of location of competition. With (symmetric) global competition,
rents are typically small and market variety near optimal. With local
competition, profits may be protected because entrants must find profitable niches
(Anderson 2002).
A
company's physical product offering may be highly differentiated on features
not provided by competitors in the same industry, some also differentiate their
product on performance with basis on power, professional credibility etc. on
the other hand companies may differentiate their physical product on attributes
such as innovation, consistency, durability, reliability and reparability. In
addition to differentiating the physical product, the image of the product can
also be differentiated. The established image should convey a singular and
distinguished message that will communicate the product’s main benefit and
positioning.
Pearce
and Robinson (2005) aver that differentiation strategies are based on providing
buyers with something that is different or unique, that makes the company’s
strategic positioning, product or service distinct from that of its rivals.
Superior value is created because the product is of higher quality, is
technically superior in some way, comes with superior service, or has a special
appeal in some perceived way. In effect, differentiation builds competitive
advantage by making customers more loyal - and less price-sensitive-to a given
firm’s
product/service. Additionally, consumers are less likely to search for other
alternative products once they are satisfied. Hernant, Mikael and Thomas
(2007).
Some
of the differentiation strategies adopted by organizations to foster sales
performance evolve around interplay of various elements of the retail mix.
These include: offering quality products, wide selection, assortment, strategic
positioning, after-sales-service, quality service, convenient location, parking
space, attractive design and layout, conducive atmosphere, sales incentives,
convenient operating hours, own branding/value addition and a one-stop-shop.
Carpenter and Moore (2006). Economically valuable bases of product
differentiation can enable
a firm
to increase its revenues, neutralize threats and exploit opportunities.
When emphasis is placed on activities such as
research and development aimed at identifying and satisfying customer needs
differentiation achieves the desired objective. To add to the above, the effect
of differentiating a product may not necessarily be in terms of money or
financial terms but also certain benefits that enhance the value creation
process of the firm. As globalization
leads to more intense competition among manufacturing organizations, with
increase in customer demands, these organizations tend to seek competitive
advantage by producing products with more valued features, such as product
quality, product flexibility or reliable delivery (Baines and Langfield-Smith,
2003). As such, a differentiation strategy would provide greater scope for
these organizations to produce products with more valued, desirable features as
a means of coping with such demands. This research work therefore, focused on
how competitive advantage can be achieved through product differentiation
strategy and ultimately, how it influences the performance of the organization
in the manufacturing company, using Unilever Nigeria Plc as a study.
1.2 Problem
Statement
Despite the need for firms to differentiate
their products in order to create and sustain competitive advantage and the
fact that competitive forces in the organization are determined by the degree
of differentiation, little effort seem to be made by firms in this industry to
harness the benefits associated with differentiating their products .
Evans,
(2005), view that the pace at which firms in Port
Harcourt utilize product differentiation strategies to insulate their firms
against competitors and to enhance profitability seem to be relatively slow as
compared to that of firms in other Industries. In order to find answers to
these problems, this study is to investigate or to determine whether or not
there exists a relationship between sales performance and Product
differentiation manufacturing firms Port Harcourt
1.3 Purpose of the study
The
purpose of the study will determine product differentiation and sales
performance in manufacturing firms in Port Harcourt. The Specific Objectives are as follows
1. To determine the extent to
which Product quality influences Sales performance in manufacturing
firms Port Harcourt.
2 To ascertain the extent to
which Product design influences Sales performance in manufacturing
firms Port Harcourt.
3) To examine how product superiority enhances
sales performance in manufacturing firms Port Harcourt.
1.4 Research
Questions
The following research questions have been
formulated and will be answered at the completion of this work
i) To what extent does Product Quality enhances sales
performance in manufacturing firms Port Harcourt?
ii) To what extent does Product Design enhances sales
performance in manufacturing firms Port Harcourt?
iii) To what extent does product superiority enhance
sales performance in manufacturing firms Port Harcourt?
1.5 Conceptual Framework
CONCEPTUAL
FRAMEWORKS OF PRODUCT DIFFERENTIATION AND SALES PERFORMANCE
Source: Conceptualized from literature, 2015
1.6 Research Hypothesis
Here, certain questions are raised; the
provision of answers to them will be controlling the idea of the research work.
The questions pertain the crux of the matter and are statements of major
problems to be encountered as the progress is made on the work. The questions,
which are interdependent, include the following ones:
HO1 There is no significant relationship
between product Quality and Repeat Purchase.
HO2 There is no significant relationship
between Product Design and Sales growth.
HO3 There is no significant relationship
between Product superiority and Profitability.
1.7 Scope of the Study
The general content scope of this study covers Product Differentiation and Sales
Performance. The geographical scope is Port Harcourt in Rivers State of
Nigeria.
1.8 Significance of the Study
Because of the complex nature of some firms,
this study gives a comprehensive approach of firms employing Product
differentiation usage
in manufacturing
firms Port Harcourt. A
thorough understanding and knowledge of the factors that have impact on Product
differentiation are
very useful in guiding eateries owners and managers to design and deliver the
right offering and strategies. The study findings also provide the owners
of the Organizations with an opportunity to further understand available
Product differentiation that can be employed to boost sales performance.
This research
project will therefore be of immense advantage or benefit to the management of
companies, computers and other business organization using product
differentiation. Hence, the theories and concept contained therein can be
infused into their management system.
1.9 Definition of terms
Product differentiation: A marketing process that showcases the
differences between products. Differentiation looks to make a product more
attractive by contrasting its unique qualities with other competing products
Sales
performance:
sales performance is usually for a certain period of time the employee has
worked.
Product
quality: The group of features and characteristics of a saleable good which determine its
desirability and which can be controlled by a manufacturer to meet certain basic requirements.
Product design: Product design as a verb is the
process of creating a new product to be sold by a business to its customers. A
very broad concept, it is essentially the efficient and effective generation
and development of ideas through a process that leads to new products.
Market
share: The percentage
of an industry or market's total sales that is earned by a particular company
over a specified time period. Market share is calculated by taking the
company's sales over the period and dividing it by the total sales of the
industry over the same period.
Repeat
Purchase: The buying of a product by a consumer of the same brand name previously bought on another occasion. A repeat purchase is often a measure of loyalty to a brand by consumers and is often taken into account by marketing researchprofessionals to evaluate a business.